What began as a military operation launched by the alliance of Israel and the United States to push for regime change in Iran and neutralize the country’s allegedly destructive nuclear ambitions has effectively redrawn the geopolitical fault lines across the Middle East.
Following the escalating conflict between Iran and the US-Israel alliance, the attention of policymakers, economists, governments, investors, and businesses around the world has been fixated on a maritime stretch of 33 kilometres known as the Strait of Hormuz.
One of the most critical trade routes in the world, the Strait of Hormuz carries an estimated 20% of the entire global oil trade and is relied upon by major economies including India, China, Japan, and Saudi Arabia for a significant proportion of their imports and exports.
While Iran’s Foreign Minister recently told Al Jazeera in an exclusive interview that the country has no intention of closing the Strait of Hormuz at present, reports from outlets like The Sunday Guardian and Bloomberg paint a different picture.
These reports suggest that tankers were actively avoiding the Strait even on March 1, following Iranian strikes on countries hosting US bases across the Middle East — some of which have been deflected and have struck tankers and ships in the Strait.
If the Strait of Hormuz were effectively closed amid escalating Middle East tensions, the consequences could reverberate worldwide. What will be the potential fallout for major Asian economies and the global flow of trade and energy if that happens? Let’s take a look.
Trade Context: A Near-Trillion-Dollar Oil Problem
Nearly 17 to 20 million barrels of crude oil pass through the Strait every day, roughly 20% of global petroleum consumption. Oil shipped through this chokepoint originates largely from OPEC+ and Gulf producers including Saudi Arabia, Iraq, Kuwait, the UAE, Qatar, and Iran.
For nations like Saudi Arabia and Kuwait, up to 90% of their exports must pass through this single chokepoint to reach the global market, underscoring their deep dependence on this strategic waterway.
Beyond crude, Qatar — one of the world’s largest LNG exporters — also relies heavily on the Strait for gas shipments to energy-dependent countries like India and China in Asia, and select European markets such as France.
Following the geopolitical disruption, Brent crude prices reached their highest levels since mid-2025, trading near $73 per barrel before the latest strikes, with further spikes expected. According to a report by EY, if the conflict lasts beyond a week, sea freight rates could surge by nearly 40%.
A prolonged blockade would therefore squeeze both oil and gas markets simultaneously.
Impact on India
For policymakers in India, mounting pressure on the Strait of Hormuz is not just a geopolitical escalation — it is a major economic problem. India imports nearly 85% of its crude oil requirements. Around 50% of those imports originate from Middle Eastern suppliers such as Iraq, Saudi Arabia, Kuwait, and the UAE, many of whose shipments pass through Hormuz.
Analysts interviewed by Reuters and IANS have warned that a prolonged closure could trigger a sharp rise in fuel prices and put pressure on the rupee. Given oil’s central role in logistics and industry, cascading price increases could slow GDP growth and disrupt industrial production.
A prolonged blockage of the strait could also inflate export costs for India’s transport, fertiliser, rice, and manufacturing (MSME) sectors, all of which critically depend on this route.
India exported nearly $47.6 billion worth of non-oil goods to Gulf economies that rely on shipping routes linked to the Strait of Hormuz — approximately 13.2% of India’s total non-oil exports, estimated at $360.2 billion. These figures highlight the scale of exposure if shipping flows are disrupted.
Critical consequences for China: The world’s largest oil importer
China imports roughly 10 million barrels per day of crude oil, with an estimated 40% transiting through the Strait of Hormuz. While Beijing has diversified supplies through pipelines from Russia and Central Asia, these alternatives meet only a fraction of total demand.
If flows via Hormuz halt, it could significantly hamper industrial output in one of the world’s largest manufacturing economies. Furthermore, given China’s centrality to global manufacturing, any sustained slowdown would trigger large-scale supply chain disruptions and send economic shockwaves worldwide.
Impact on Japan and the UAE
Japan imports over 70% of its oil, with roughly three-fourths sourced from the Middle East. South Korea faces similar exposure. Both economies are heavily industrial and export-driven, and a sustained energy shock would raise power generation costs and hurt manufacturing margins.
For the UAE, any disruption to the Strait could significantly hamper export revenues by driving up the logistics costs of rerouting shipments. Notably, oil shocks have historically preceded major economic downturns.
That said, this oil shock is not expected to immediately translate into the doomsday scenarios being floated by various entities. This is primarily because major oil-importing countries are members of the International Energy Agency (IEA), which mandates members to hold emergency oil reserves equivalent to at least 90 days of net imports.
These emergency reserves are maintained at varying levels by member states, enabling them to sustain operational stability during supply disruptions.
The Strait of Hormuz is only 33 kilometres wide at its narrowest point, yet it carries the economic lifeblood of multiple nations. While a short-term disruption is likely to rattle markets, a prolonged closure that depletes strategic reserves could exact a severe toll on the global economy.
For now, markets are pricing in risk, not catastrophe. But if shipping halts and emergency reserves begin to deplete, the world may discover just how much power lies in one narrow stretch of water.